4 What is ETS? EU Emissions Trading Scheme (ETS) is aimed at combating the threat of anthropogenic climate change Introduced in 2003 to achieve the EU s targets for reducing Greenhouse Gas (GHG) emissions under the Kyoto Protocol Development in phases (trading periods),currently in Phase III ( ) First and largest world wide system for trading GHG emission allowances 11,000 power stations and industrial plants in 31 countries, as well as airlines November 2015 P3

5 How ETS works Works on the cap and trade principle. Total cap set for GHG / CO2 emissions Phase III CO2 emissions reduced by 1.74% annually Purchase and trade of EU allowances (EUAs) Receive free allowances, if eligibility criteria are met (Also account for carbon leakage ) Purchase EU allowances and/or credits from approved energy saving projects worldwide Companies within ETS Must annually surrender EUAs for every tonne of CO2 emitted in the previous year November 2015 P4

8 Direct costs of ETS for Offshore oil and gas operations Upstream E&P (100 offshore installations & 26 onshore terminals) Emitted 14.7 million tonnes of CO2 equivalent (mainly CO2 and methane) in % of total UK GHG emissions CO2 emissions from combustion of fuels for electricity generation and compression and emergency flaring Phase III million per year Phase IV post 2020, if carbon price 25 / te CO2, cost will be million per year November 2015 P7

9 Direct costs of ETS for Offshore oil and gas operations 37% decline in CO2 equivalent emissions Decline in production and decommissioning in UKCS Efforts to minimise all avoidable emissions and improve energy efficiency / emissions intensity Energy consumption and flaring in Europe lower than elsewhere in the world due to stringent environmental and safety regulations (IOGP) November 2015 P8

16 Case Study Catcher Development Catcher development 3 subsea tiebacks: Catcher, Varadero and Burgman New FPSO and gas export/import line Production of hydrocarbons via gas lift and water injection Export of oil via tanker and initial export of gas to Fulmar gas line November 2015 P15

18 Reducing CO2 emissions for new developments ETS and new developments Process / power generation designed and operated to minimise emissions Measurement (metering / sampling) appropriate Automated data gathering & production modelling All of this has to be integrated into planning / commissioning from the earliest project stages November 2015 P17

19 Summary ETS is important and evolving Need to be aware that ETS scheme (Phase IV) and compliance is changing In short term key issue is compliance In longer term need to consider total emissions (EUA s) as well as compliance Key actions to support reduction in CO2 emissions are: Improving production / operational efficiency Need to consider during project planning Decisions to invest have to recognise the importance of ETS November 2015 P18

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